It was after being sent this interview with media tycoon John Malone, and the subsequent perplexed look on Jim Cramer’s face, while grasping what John had said, that prompted me to revisit one of our more interesting investments that I’d like to share today.
It was earlier this year that we started positioning capital for just one of the inevitable consequences of lockdowns – higher food prices.
John, it seems, agrees with us, much to Cramer’s shock, though I’m not sure why – because this is such an utterly simple investment idea to grasp.
Let me show you.
You see, we’ve all been told to stay at home and hide under the bed, and just in case we said…”pah the hell with you, I’m off to Barbados” they promptly shut the borders.
And so given we couldn’t get to Barbados, and instead fancied drowning our sorrows with a pint down at the pub, they shuttered our ability to do that too.
Annoying for sure, but something far more serious than your cancelled Barbados vacation took place… and it continues as I write this today.
I am referring to the completely insane restrictions placed on farming and logistics operators, making it either illegal for farms to operate, (hiring of labour to harvest produce, or deeming them “non essential”) while making it next to impossible for many food producers to move their produce around the world.
We’d all have been forgiven for thinking Governments couldn’t possibly be THAT stupid. Sure they’re incompetent, but intentionally destroying food supply is not only stupendously thick, but murderous.
Well, like so many other things filed under “what the actual f***?!”, we were being too generous.
Here’s what we originally wrote to Insider members, many months ago, when we shared how we were investing ourselves:
The lockdown touted as a “cure” for the virus promises to be a curse and absolutely worse than the Corona would have ever been. Worse by orders of magnitude.
The crowd has failed to appreciate an even greater emerging problem – global food production.
As trade walls go up and governments panic about preserving their own food sources, the government’s actions to this virus threaten to disrupt global supply chains.
Millions of migrant workers involved in agriculture and food production are now immobile due to border crackdowns. This has left produce unharvested and much-needed food left to rot in fields.
Seasonal laborers from Eastern Europe are missing on the farms of Spain, Germany, Italy, and France. India has limited rice exports due to labor shortages.
Russia, the world’s largest wheat exporter, is limiting grain exports from April to June. Egypt, the world’s biggest wheat importer, has ramped up grain purchases and halted all exports of legumes.
Vietnam and Myanmar have banned rice exports and this folks is just an appetiser of supply restrictions.
Did you know all of this is going on? I suspect not.
The hysterical wailing and gnashing of teeth by the hand wringing mainstream media aren’t interested in what truly matters. Certainly not in the truth that’s for bloody sure, and as a consequence market participants from sea to shining sea seem gleefully oblivious to the problems that are coming down the track like a freight train.
We read reports of farmers having to euthanize (pretty word for shoot) pigs that were ready for slaughter and aborting sows in pigs, and gassing countless chickens.
It’s disgusting, maddening and heartbreaking all at once but that is what happens when supply chains are messed with
We sincerely wished we had been wrong in our analysis. Sadly today, it looks as though we are very much correct.
“But wait… Chris, what about the virus which could have killed so many more people if we didn’t do lockdowns!? The virus Chris, the virus!”
Ah yes, the dreaded “Rona”.
This would be the virus that is at least 40x less deadly than the utterly debunked models all these rules were singularly based off.
And the virus that brought all these “temporary” measures that we seem to now enjoy in perpetuity.
The same virus which is now immune from critical discussion, with social media censoring debate, including and especially from a rising wall of dissenting opinions of hundreds of thousands of health professionals.
The virus which is factually not particularly dissimilar to the seasonal flu.
If reading this last sentence caused you to twitch in suspicion that I am some uninformed, ignorant idiot who does not care about millions dying, then I challenge you to keep reading to the end, and, if you disagree with any points below, be brave enough to share them in the comments section.
Productive discussion using reason and logic used to be how we arrived at the truth. Now of course, we have Facebook, Twitter, Google, and that ridiculously inept or just downright corrupt “fact checking” site – Snopes… and all the other fact knowers who do that job for us. Shut up and accept the narrative you damn plebs.
But let’s be generous and say the virus is four times as deadly as the flu, which would place it in the “Ebola on steroids” category which is of course what we were led to believe we were facing. Well how did that turn out?
Here is an approx. average, courtesy of the CDC
|Age||Chance of Survival|
|0 – 19||99.997%|
|20 – 49||99.98%|
|50 – 69||99.5%|
Let’s be generous and say that instead of the number of deaths being wildly exaggerated, the government number crunching boffins undercounted the actual deaths from the virus, and the global death toll wasn’t 1.46m as it is today, but 2m (which would be less than the upper range of the now infamous Imperial College prediction for US deaths alone, but I digress).
Would such a result have still justified the catastrophe we now face?
Here’s where I’d like to introduce you to iatrogenics (the cure being worse than the ailment).
This is from the David Nabarro, a chap neck deep in the upper echelons of the World Health Organisation, Imperial College and the UN, talking to This Week In 60 Minutes in mid October.
“I want to say it again: we in the World Health Organization do not advocate lockdowns as a primary means of control of this virus. [. . .] We may well have a doubling of world poverty by next year. We may well have at least a doubling of child malnutrition because children are not getting meals at school and their parents and poor families are not able to afford it.
This is a terrible, ghastly global catastrophe, actually. And so we really do appeal to all world leaders: stop using lockdown as your primary control method. Develop better systems for doing it. Work together and learn from each other. But remember, lockdowns just have one consequence that you must never, ever belittle, and that is making poor people an awful lot poorer.”David Nabarro, Special Envoy to the WHO
Wow, it’s like he’s saying that lockdowns weren’t a great idea. How could that be?
Wasn’t Fauci just applauding Australia for taking such “decisive action” and crushing the spread of the disease?
Don’t the CDC and WHO agree on these things?
Apparently a lot of people asked that question, which is presumably why Nabarro then went on to say he was “misquoted”.
His colleague had a less than impressive stab at clearing the confusion on live TV in Australia, which is home to many who didn’t take too kindly to being told they’d spent the last 6 months as prisoners in their own homes for nothing:
Great job Dr. Margeret, thanks for clearing that up!
If you listen to Nabarro’s interview, he’s clearly not being misquoted.
He said verbatim what is written above, and he was not taken out of context. He may have mis-spoke, in the sense that his handlers wished for a different message to be broadcast. Propaganda must be a bitch to keep spinning.
Or perhaps he’d been chatting to his mate Dave Beasley over at the UN. This is from their World Food Programme
NEW REPORT SHOWS HUNGER IS DUE TO SOAR AS CORONAVIRUS OBLITERATES LIVES AND LIVELIHOODS
The number of acute food insecure people in these at-risk countries could increase from an estimated 149 million pre-COVID-19 to 270 million before the end of the year if life-saving assistance is not provided urgently. Recent estimates also suggest that up to 6,000 children could die every day from preventable causes over the next six months as a result of pandemic-related disruptions to essential health and nutrition services.
In case you missed it, let me put it into plain English:
Dave is saying the lockdowns and other restrictions implemented since March are going to be responsible for 121 MILLION people dying.
Here is a little visual reminder of the cumulative deaths from Covid (which I’ll add include many who died “WITH” not from the Rona). In very simple terms nearly 100 people will die for every Covid death, and all of this directly as a result from lockdowns.
Importantly, the UN are here saying that this was avoidable, and is directly due to the pandemic related lockdowns.
Now, just like the wildly inaccurate predictions which got the world into lockdowns, this figure is probably also wrong, and I’ll bet that the boffins at the UN World Food programme are not unlike the boffins in any government department… regular people, who focus myopically on making whatever it is they’re doing seem critical, with zero considerations for the hysteria and subsequent overreactions policy makers initiate to cover their arses.
But I digress.
Let’s award more leniency to the argument that the virus justified destroying the economic efficiencies built up over decades in our global food system leading to the greatest humanitarian crisis in living memory.
Let’s look at this from the point of view of believing the lockdowns were “worth it”, and say Dave and the UN’s own World Food Program figures are off by a whopping margin and that the international community rally to get food to as many of these people is actually possible.
Let’s say it’s 80% better than the prediction.
That is still 24 million people who will die as a result of starvation only… forgetting every other misery being caused, such as skyrocketing suicides, mental health, abuse and related health issues… directly from the lockdowns, and not the virus.
Much like the issue of greenwashing that we covered recently, even otherwise intelligent people become completely blind to anything that is not directly in front of them, and lose the ability to think critically, as if there were no such thing as second order consequences.
So now even the most pro-lockdown, mask loving, socially distanced and sanitized fanatic must surely concede one of two things;
- that the lockdowns were/are a bad idea, OR
- that the UN’s numbers are a fraud by a massive margin.
And if it’s #2: why are we trusting these globalist institutions, let alone bloody funding them?
Here’s another fact, again thanks to the UN WFP.
Unlike the virus, which overwhelmingly claims the lives of people with the least time to live, starvation kills mostly infants, children, adolescents and young women, robbing them of life, and devastating those they leave behind who cannot afford to feed them.
Today, the statistic on covid deaths (which we would argue are wildly overstated – no deaths from influenza anymore??) is somewhere around 1.46m.
According to the UN’s World Food Programme, the lockdowns are going to be responsible for around 80x the deaths from the virus.
And according to our wildly conservative adjustments to that number, it’s over 16x.
Either way you look at it, it doesn’t matter if the Infection Fatality Rate is .01 or .1.
It doesn’t matter if the ‘rona is 1 x as dangerous, or 10 x as dangerous as the flu.
We have been led into the biggest clustafuk in human history, by people like this psychopath.
And even now, when all this information is readily available, debate is not allowed to occur. Instead we are allowed only to debate trivialities such as how data is categorized, about whether it should be 12, or 15 people allowed at a bar mitzvah, or whether curfew should be 8pm or 10pm. It is – absurd.
And where are the media by the way? Shouldn’t they be doing actual journalism – say, like doing the math we just covered (it’s not that hard really) and asking critical questions of our
overlords public servants… which may have prevented this catastrophe?
Oh that’s right, they’re either too busy parroting what they’ve been told to say, or they’re covering the REAL issues, like “white privilege”.
Now this might make you start appreciating why non-experts arguing about IFRs vs CMRs or the development of ridiculously complex plans reminiscent of the USSR such as this one…
…is the equivalent of people rearranging deckchairs on the Titanic.
We are told, they will protect us – though from what I ask? A virus with a 99.97% survival rate?
While in the pursuit of controlling nature, these interventions are leading to suffering being placed on the world’s poorest, and while these do-gooders are all arguing about it, people are dying.The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design - HayekClick To Tweet
Now that we’ve hopefully given some food for thought on the official narrative of all these absurd measures being taken in order to keep us all “safe”, let’s dig in to what never gets looked at; the unintended economic consequences of covid-19, and why agriculture in particular is an attractive place to put some of your wealth, before it’s inflated away by your caring public servants.
Relying on Government for anything is… always an inferior option. This is quite simply because if centralised decision making worked we’d all be speaking Russian.
And now we find ourselves in the midst of two sets of Government selected “experts”, one set in the medical field and the other in economics.
Clearly the “medical experts” have ballsed this up to a degree that even a child would be embarrassed about.
The economists on the other hand, are pseudo scientists.
They’re generally academics, who study the complexities of the economy, and try to make sense of it the best they can. They’re generally wrong (because those with any talent go manage money or run their own businesses), and this can be visually proven by the laughable forecasts of the IMF over the years, who pay their senior analysts upwards of US$180k:
Or how about good old Ben?
And even though they are repeatedly and demonstrably wrong, they still act as though they’re right, explaining away the fact they have no idea what they’re talking about through either jargon, or blaming someone or something.
So now we have government leaning on the advice of inept and corrupt health officials and the economic destruction that now lays in its wake will be “fixed” by – deep breathe – Government economists.
Perhaps you recall all those scary stories we read when we were in high school, about how we would all starve due to food shortages and an overheating planet.
Turned out, much like the climate crew – another bunch of pseudo scientists that said we’d be all burnt to a crisp and underwater by now – were wrong.
Technology, developed by human capital (and not the government) came in and solved these problems of world hunger. Technology – invented by real scientists, and deployed by the private sector – solved the pressing issue of world hunger.
But it wasn’t just technology.
It’s critical to understand that this advancement into every corner of the world was only made possible by globalisation, increasing free trade and the ability to transfer technology advancements not only in fertilizers, but in lowering the costs of almost every input…
That tractor ploughing a field in Brazil that was manufactured in Japan.
The fuel to power it imported from the US.
Or the capital investment into farmland in Ukraine from a private equity fund based in Cayman.
These enormous and tightly coordinated distribution and supply chains of the end products allow someone in Taipei to enjoy a cup of coffee that originated in Ghana, and myriad other agricultural products from all over this ball of dirt we call home.
It’s this foundation of global trade – where everything became more efficient forcing prices down (despite all the govt money printing!) that allowed technology to not only do its thing but to accelerate.
This impossibly complex engine, that no one person or body directs or controls, is now coming to a screeching halt, as governments lockdown, shut borders and impose measures reminiscent of East Germany where, like today politicians believe they in their infinite wisdom know what is best.
And what does that mean?
Shortages, and as a result, higher prices.
You see, ever since World War 2 globalisation had the net effect of making countries interdependent.
Before that, your country used to make and sell much more of its products domestically.
But nowadays, most countries in the West export a concentrated number of specialist items, and import everything else. It has suited Western politicians, because they got to go on massive spending binges without prices of these goods rising and having people turn up outside their offices with pitch forks. It suited Joe Six Pack, who got to buy a big TV for his man(child) cave and keep up with Donny next door, who gets a brand new car every couple of years.
We can see this dynamic of deflation as a result of globalisation and at the same time we can see the inflation caused by central banks on anything that couldn’t be imported from low cost emerging markets…Health care and School fees for example. Consider calling a plumber or an electrician. The dentist. House prices. All the things we need to purchase that are domestically produced, are a lot more expensive than they used to be, unlike the stuff that can be offshored, which has become much, much cheaper.
So what happens when you’re in the UK, and you take a giant wrench and jam it into something like this (courtesy of https://merchantmachine.co.uk/uk-import-map/)
Well, you don’t need to be a $180k per year analyst at the IMF to understand that a lot of this isht will simply have to come from elsewhere.
And the second order consequence of that means – you guessed it – higher prices, because it costs time, money and human capital to go find where that other isht is, and negotiate to get it at the best rate, which will almost certainly be more expensive.
You’ll notice in these diagrams a lot of agricultural products, but you’ll also notice a lot of oil is imported into the UK.
“Hmm… that’s curious Chris. Isn’t oil used for energy, and tens of thousands of product applications ranging from ice cream to contact lenses?”
“Also it appears a lot of commodities used to make electrical components are imported to the UK from other countries. Chris, won’t that affect the price of building god-knows how many million wind turbines to power every house by wind in the UK by 2030?”
The point is, the price of most things is going to go up, relative to your dollar or pound or euro etc.
Now, you can believe the deflationistas out there, who believe that our currency will become stronger against this “stuff”, if you want. Be my guest. I don’t buy it.
With agriculture (and energy, and a bunch of other stuff we’re investing in) there exists truly amazing asymmetric set ups the likes of which we’ve never seen in our professional careers.
You have inflation… you know, the tool of those who love making money from kicking the can down the road…
You have the lockdowns, which I’ve covered.
You have the massive trend of deglobalisation, which would turn this article into a novel if I covered it.
You have the fact that agricultural commodities are the cheapest they’ve been for decades, relative to what the herd is doing e.g. the S&P 500, thereby cementing an asymmetric setup…
Aaaaaand you even have the weather on your side, with the world entering a predicted cooling period thanks to a solar minimum that should last a couple of decades.
Now, we’re comfortable enough with the first four enormous, inescapable reasons why agricultural commodities make sense to own, to not rely on this solar minimum phenomenon, which is frankly more of an unknown and out of our realm of expertise.
The question is, how does one invest?
Let’s switch from analysing the macro to putting our execution hats on.
Adopting a bullish view on rising food prices isn’t the real challenge.
The real challenge is applying the view, which is often more tricky than you’d think.
“But Chris, how can it be so tricky? just buy an ETF that tracks grain prices like wheat and corn?”
Not so fast, Batman.
The problem is ETFs that track commodities, are typically backed by futures, which do a horrid job over the mid-long term at tracking the spot prices of respective commodities.
This is due to the costs inherent in rolling from one contract to another. These sneaky little bastards are literally designed to decay over time.
These ETFs are only good at earning fees for the ETF providers and possibly for very short term traders, but even then sharp traders will trade the futures themselves, not the ETF. In any event they’re completely isht for executing a long term bullish view on the sector. I highly recommend ignoring them.
Here is a Corn ETF (orange) and Corn Futures (purple), indexed to 0
And here’s the ETF for Wheat (orange) and Wheat Futures (purple), indexed to 0
As you can see these creatures are… horrible, just horrible in terms of providing exposure to agriculture.
“But Chris, if investing in commodities directly via ETFs is out… what next?”
Well not trading in futures themselves for starters. That is a very specialized way to trade and only courts disaster for most investors.
No, instead we’re left with investing in equities that better track the prices of food commodities.
Things like chemicals, machinery, pharma, animal health, seed, processing, land, and fertilizer.
But, after months of research, we settled on only a few of these, picking a basket of stocks the same we way screen all our investments – where risk is low and target returns are realistically more than 300% over a 5 year timeframe, or thereabouts.
Insider members will have received these months ago, and our clients in Glenorchy Capital know very well what these are.
As for now, we’ll simply wait for reality to catch up with our predictions.
Watch this space.